Hotels Hit Pause on Pricey Renovations

Yvonne Lembi-Detert of Personality Hotels couldn't afford to renovate all the rooms at the Hotel Vertigo in San Francisco.Credit
Peter DaSilva for the New York Times

AT the Hotel Vertigo in San Francisco, guests on the fourth floor can expect new bathrooms, soundproof windows, flat-screen televisions and furniture ready for a travel magazine close-up.

Guests on the third floor cannot.

A $6 million renovation of the hotel was supposed to be completed earlier this year. But Personality Hotels, which owns the Vertigo, formerly known as the York, and six other hotels in San Francisco, decided to save money by leaving part of the building untouched.

Yvonne Lembi-Detert, the president of Personality Hotels, said that she had already bought everything needed, from tiles to TVs, to complete the transformation of the hotel’s 97 rooms. But the one thing she doesn’t have right now is enough money.

All over the country, hotels are halting or postponing renovations in numbers not seen since 2001, when the terrorist attacks led to a retrenchment in the travel industry, according to Chad Crandell, the president of Capital Hotel Management. This time, the cause is a decline in revenue — both occupancy and room rates are down in most cities — coupled with the difficulty of obtaining credit.

For hotel owners, “the name of the game is capital preservation,” said David Loeb, an analyst with Robert W. Baird & Company in Milwaukee.

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One of the updated rooms at the Hotel Frank, also in San Francisco and owned by Personality Hotels.Credit
Peter DaSilva for The New York Times

Most large hotel companies, Mr. Loeb said, “have ratcheted down their capital plans, to focus only on life safety kinds of concerns.” Companies want to have cash reserves, “in case things get worse for the industry,” he said.

No hotel owner wants to halt a renovation that has already begun. But that’s what happened at the Ritz-Carlton Rancho Mirage (formerly the Lodge at Rancho Mirage), near Palm Springs, Calif., where a top-to-bottom makeover began in 2006. Construction was about 80 percent complete when the lender, Lehman Brothers, filed for bankruptcy protection last September. Now the developer, a division of the Gencom Group, is seeking new financing that would allow it to complete the renovation.

Other hotel projects, though, are proceeding apace. The Mark Hotel in New York is preparing for a summer opening after a gut renovation. At the W in Washington, the general manager, Ed Baten, said that he had already booked a wedding for this summer, indicating that the hotels’ transformation is in the final stages. That hotel is owned by Nakheel, a development company sponsored by the Dubai government.

At least one major project has benefited from the recession. At the Four Seasons Hualalai, on the big island of Hawaii, a decline in occupancy helped simplify a $40 million renovation, according to the general manager, Robert Whitfield. Mr. Whitfield said that this spring, with occupancy down 20 to 25 percent over last year, turned out to be “an opportune moment” to add 20 suites and redo spa and restaurant facilities.

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An unrenovated room. The company is saving money by updating only part of the hotel.Credit
Peter DaSilva for The New York Times

“It would have been harder to do with our typical demand patterns,” he said.

But for many other hotels, now is anything but an opportune time to renovate. Hotels that fly brand “flags” are in a particularly tough sport, said Mr. Crandell of Capital Hotel Management, which manages a portfolio of 22 hotels, including the Sheraton Waikiki in Hawaii, the Courtyard Detroit Downtown, and the W Atlanta Downtown Hotel and Residences.

Mr. Crandell said that in order to remain part of the chains, branded hotels are generally required to perform “soft goods renovations” — replacing bedding, carpets and the like — every six to seven years, and more comprehensive renovations every 10 to 12 years. The hotel owners need permission from the brands to delay scheduled improvements.

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Luckily, said Mr. Loeb, the Robert W. Baird analyst: “The brands are being very constructive in their conversations with the owners. They’re trying to be as flexible as they can without sacrificing the guest experience. They want the owners to survive.”

Mr. Crandell said that 90 percent of his hotels were “working with our brands, trying to pull back on capital renovations.” He declined to name specific projects, citing the confidentiality of discussions with hotel chains about brand standards. The company has not postponed projects that relate to safety, he added.

In San Francisco, Ms. Lembi-Detert has been a one-person arbiter of brand standards since she created her first hotel some 30 years ago. Even in flush times, Ms. Lembi-Detert said, she has kept close tabs on renovation costs. Her method, she said, is to hire good designers, but then eliminate extravagances from their plans.

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A renovated room.Credit
Peter DaSilva for The New York Times

For the Vertigo, the designer was Thomas Schoos of Los Angeles. “He wanted the bathroom floors to be made of tile with the texture of pigskin,” Ms. Lembi-Detert said. Instead, she said, “I just got a brown nonskid tile.” She added: “The owner calls the shots.”

As a result of her frugality, she said, the money allocated for the Vertigo renovation would have lasted if she hadn’t encountered “plumbing and electric surprises” in the building’s walls.

“Whenever you renovate an old building, you don’t know what you’re going to find,” Ms. Lembi-Detert said.

So, she said, she has to come up with several hundred thousand dollars more than she initially budgeted for the renovation of the Vertigo and its sister property, the Hotel Frank. “And no one will lend it to me right now,” she said.

PAYING from current accounts isn’t an option, because a rate war has driven San Francisco hotel prices down. In fact, Ms. Lembi-Detert said ruefully, “The rates are the same as when I got into the business 30 years ago.”

Recently, renovated rooms with king-size beds were going for $137 a night, about $30 more than similar unrenovated rooms.

Ms. Lembi-Detert says she is working closely with her contractors to devise a plan for finishing the renovation project. “If you don’t work together during these times,” she said, “it’s all going to fail.”

A version of this article appears in print on , on Page BU14 of the New York edition with the headline: Hotels Hit Pause On Pricey Renovations. Order Reprints|Today's Paper|Subscribe